TDS under GST: Liability & Responsibility

TDS under GST, After the implementation of GST in India, We are getting every week new amendments as the addition, deletion, and modification of rules of GST for example TDS under GST in India. As we know TDS is already under income tax but TDS under GST is different from TDS under income tax.

Because deductions of tax under the GST laws are required to be made wherever applicable while making payments to the suppliers of goods or services or both under GST for taxable supply of goods or services or both. Further, we need to know the type of person liable to deduct TDS under GST laws.

What is TDS in GST?

TDS full form is Tax Deducted at Source (TDS). And as per section 51, TDS under GST means applicability of TDS for the Government and Government undertakings and other notified entities making contractual payments where the total value of such supply under a contract exceeds 250000 ₹ to suppliers.

Who are liable to deduct TDS under GST?

In short, all types of DDOs are liable to deduct TDS which are listed below:

  1. A department or establishment of the Central Government or State Government
  2. Local authority
  3. Governmental agencies
  4. An authority or a board or other bodies as
    1. set up by an Act of Parliament or a State Legislature or
    2. Established by any Government, with 51 % or more participation by way of equity or control, to carry out any function.
  5. Society is established by the Central Government or the state government or a Local Authority under the Societies Registration Act 1860.
  6. Public sector undertakings

What is the rate of TDS under GST?

TDS is to be deducted at the rate of 2 % on payments made to the supplier of taxable goods and services, where the total value of such supply, under an individual contract, exceeds ₹ 2,50,000.

How is TDS calculated on GST?

TDS is calculated as follows under GST

For example– TDS to be calculated on the base (taxable value) such as = ₹ 3,00,000, GST rate -28% and TDS rate in GST = 2% (1% CGST and 1% SGST). So here calculation to be made excluding the tax amount (₹ 354000 – ₹ 54000)=₹ 300000.

In the given example TDS will be 2% of ₹ 300000 = ₹ 6000

Can we claim TDS on GST?

Yes, TDS and TCS credit received is a facility available after logging in to the GST portal. It can be filed by all the taxpayers who are making specified sales on the e-commerce platforms and/or entered into any kind of works contract with Government departments.

What is the limit for TDS under GST?

₹ 2,50,000 is a limit amount as per Section 51(1) of the SGST/CGST Act, 2017, If the total value of supply of taxable goods or services or both exceeds two lakh and fifty thousand rupees, then TDS shall be deducted at the prescribed rate. Hence the threshold limit is Rs. 2,50,000.

Which form is required to file the TDS return?

The person deducting tax is required to file a TDS return in form GSTR-7 within 10 days from the end of the month. When the GSTIN of the unregistered supplier is not available, their name can be mentioned. The robustness of the system reflects these filled-in details in the electronic ledger of the supplier.

What is the benefit of TDS to the deductee (Supplier)?

There will be an automatic reflection in the electronic ledger of the deductee (supplier) once the deductor files his/her returns in the form GSTR-7. The deductee can claim credit in his electronic cash ledger of this tax deducted and use it for payments of other taxes.

What is a TDS certificate under the GST law?

Similar to the Income Tax Law, the person deducting tax under GST has to issue the TDS certificate in form GSTR-7A to the concerned person within 5 days of depositing the tax to the government. However, the GST portal will automatically make GSTR-7A available to the deductee on the basis of the GSTR-7 filed.

What is the value of supply for TDS under GST?

For the purpose of deduction of TDS, the value of supply is to be taken as the amount excluding the tax indicated on the invoice. This means TDS shall not be deducted on the CGST, SGST, or IGST component of the invoice.

For example– Supplier M makes a supply worth Rs.250,000 to the N. The rate of GST is 18%. When N pays M, he/she will pay Rs.250,000 (worth of Supply) + Rs.45000 (GST) to M and Rs. 100 (RS. 5000*2%) as TDS to the government. So it can be said that TDS is not deducted from the tax element (GST) of a transaction.

What are the registration requirements for TDS deductors?

A person who is liable to deduct TDS has to compulsorily register and there is no threshold limit for this. The registration under GST can be obtained without PAN and by using the existing Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act. Thus it can be said having TAN is mandatory.

What are the responsibilities of DDOs in TDS under GST to get their official registration in GST?

Moreover, these all are the responsibilities of DDOs in TDS under GST to get their office registration under GST:

  1. Firstly of all, To know the GSTIN No of his office
  2. To be aware of the contract value
  3. To know when to deduct TDS
  4. And know the nature of TDS and the rate of the tax
  5. To know the GSTIN of his vender/ suppliers
  6. To deduct TDS while making or crediting the payment
  7. And generate CPIN while depositing the TDS
  8. To pay the deducted TDS to the appropriate Govt. A/c
  9. to submit a GSTR-7 return
  10. To generate GSTR-7a (TDS certificate for supplier)

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